Florida Building Contractor Business/Finance Practice Exam

When is an employee required to complete a new IRS form W-4?

1. A change in marital status

2. A new job opportunity

3. End of the tax year

4. Change in physical address

The correct answer is: A change in marital status

An employee is required to complete a new IRS Form W-4 when there is a change in marital status. This is significant because a change in marital status can affect an individual's tax withholding. The W-4 form determines the amount of federal income tax that should be withheld from an employee's paycheck, and factors such as marital status directly influence the tax rate and withholding allowances. When someone gets married or divorced, their filing status changes, which could mean they now qualify for different tax brackets or withholding allowances compared to their previous status. By updating the W-4 form, employees ensure that their employer withholds the correct amount of taxes based on their current situation, thereby helping to avoid underpayment or overpayment of taxes throughout the year. Other circumstances may warrant completing a new W-4, but a change in marital status is notably a primary reason for doing so directly linked to potential shifts in tax liability. A new job opportunity, the end of the tax year, or a change in physical address do not inherently require a new W-4 to be filed, though they might affect tax situations for other reasons.